BREAKING NEWS FROM CNBC'S KATE KELLY: GOLDMAN SACHS TO SPIN OUT PROP TRADING AS EARLY AS TOMORROW

Beth Goldman

Published 1:13 PM ET Thu, 5 Aug 2010
CNBC.com

WHEN: Today, Thursday, August 5th at 12:00PM ET

WHERE: CNBC's "The Strategy Session"

Unofficial transcript below. All references must be sourced to CNBC.

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BECKY QUICK: THANK YOU LARRY AND GOOD AFTERNOON, EVERYBODY. IM BECKY QUICK IN FOR DAVID FABER. OF COURSE, GARY KAMINSKY IS HERE AS ALWAYS. WE HAVE HAD A VERY BUSY DAY ON WALL STREET BUT IT'S ABOUT TO GET A LITTLE BUSIER. WERE GOING TO START THINGS OFF TODAY WITH KATE KELLY. SHE HAS SOME MORE BREAKING NEWS ON GOLDMAN SACHS AND KATE TAKE IT AWAY.

KATE KELLY: BECKY THANKS. SO YESTERDAY WE REPORTED ON PLANS FOR THEM TO SPIN OUT THEIR PROPRIETARY TRADING UNIT INTO SOME SORT OF INDEPENDANT ENTITY. THE DETAILS REMAIN UNCLEAR. TODAY WEVE GOT A LITTLE MORE CLARITY ON IT. IT SOUNDS LIKE GOLDMAN SACHS PRINCIPAL STRATEGIES WHICH IS THE EQUITY VERSION OF THEIR PROP TRADING GROUP WHICH IS A GLOBAL OPERATION IN NEW YORK AND LONDON AND HONG KONG AND ELSEWHERE IS GOING SPIN OUT AS EARLY AS TOMORROW. WE SHOULD BE LOOKING FOR A PUBLIC ANNOUNCEMENT AND THEY WILL BECOME ESSENTIALLY AN INDEPENDENT HEDGE FUND. NOW WHATS STILL A LITTLE UNCLEAR IS WHAT WILL GOLDMAN'S RELATIONSHIP BE WITH THE NEW GSPS? WILL THEY PROVIDE SEED CAPITAL? OR WILL IT BE THIRD PARTY INVESTORS? SOME COMBINATION OF BOTH? THERE IS A LOT OF MARKET CHATTER ABOUT THAT.WILL THEY HAVE A PRIME BROKERAGE RELATIONSHIP? IS IT EVEN POSSIBLE THAT GSPS WILL BE IN THE GSAM ENTITY SO TECHNICALLY OWNED, THE MANAGEMENT OWNED BY GOLDMAN BUT MORE OR LESS AN INDEPENDENT ENTITY. I AM STILL REPORTING ON THAT AND WILL BRING YOU SOME UPDATES. THE OTHER ISSUE IS THEIR SPECIAL SITUATIONS GROUP WHICH IS THEIR FIXED INCOMES PROP TRADING GROUP. WHAT'S GOING TO HAPPEN THERE. THERE ARE A COUPLE OF BUSINESSES WITHIN THAT THAT GOLDMAN IM TOLD IS QUITE COMFORTABLE WITH. THEY HAVE A DISTRESSED FINANCING UNIT AS WELL AS MIDDLE-MARKET LENDING GROUP THAT SHOULD BE TOTALLY FINE UNDER THE VOLCKER RULE. HOWEVER THEY DO HAVE PROP TRADERS AND THOSE PEOPLE'S FUTURES A LITTLE UNCERTAIN AND THEYRE STILL FIGURING THAT OUT.

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